DAX index suffers plunge over Asia fears

Germany's most important stock market index continued to suffer the effects of plunging confidence in Asia on Monday, losing around four percent of its value after a sharp fall in early-morning trading.

DAX index suffers plunge over Asia fears
An investor watches electronic stock information boards in Shanghai. Photo: DPA

It is the first time the stock market index has fallen below the psychologically-important 10,000 points level since January 2015 (1,000 points represents the level of the index in 1987) and the biggest single-day drop since 2007.

The lowest point of the day came just before 2 pm as the losses to the DAX hit five percent compared with its value at close of trading on Friday, but the market rallied again by time of writing.

Market watchers noted that just as in China, the lion's share of 2015's increase in value on the index of 30 leading German companies had now been wiped out.

Germany vulnerable to China weakness

Germany is particularly vulnerable to a weakening economic outlook in China due to its huge export business with the world's second-largest economy.

Exports drove much of the German economy's 0.4 percent expansion in the second quarter of 2015, Bloomberg reported on Monday, meaning that falling confidence in China could push Germany back towards zero or negative growth.

That risk is all the greater after the Chinese government's August 11th decision to devalue the yuan, making German goods more expensive thanks to the strong euro.

Daimler and BMW shares had both lost almost four percent of their values by 3pm on Monday.

The Wall Street Journal reported on Monday that German companies including Volkswagen were already slowing production at their factories in China.

But as the eurozone and German consumers recover their confidence – and their appetite for German products – the impact on Germany's economy of China's speedbump may not be catastrophic.

Asia suffers big losses

The DAX's loss in value shadowed sharp falls in Asian markets that opened earlier on Monday.

Several Chinese indices fell by around eight percent in early trading – the Shanghai stock market's worst slump in eight years – while bourses in Hong Kong, Taiwan and Japan were also hit hard.

The Tokyo-based Nikkei index fell by 4.6 percent in morning trading to below 19,000 points – its lowest point in the last five months.

China struggles to contain fears

Market observers have been watching China anxiously for weeks as the country suffers an abrupt slowdown in economic growth.

China's economy expanded at its slowest rate in 25 years in the first half of 2015, although the roughly seven-percent figure was still beyond the dreams of recovering European nations stuck in the doldrums.

The latest loss of value comes in spite of massive Chinese government efforts in recent weeks to shore up markets in the country.

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‘Important not to be last’: Spaniard becomes first ever female to solo manage German DAX firm

Belen Garijo has taken over as CEO at German pharmaceuticals giant Merck -  the first woman to singlehandedly run a DAX 30-listed company - as Europe's top economy debates quotas for greater boardroom equality.

'Important not to be last': Spaniard becomes first ever female to solo manage German DAX firm
Belen Garijo. credit: picture alliance/dpa | Markus Scholz

Spanish-born Garijo, 60, who started in the new role on May 1, says she’s not content to be a one-off.

“It’s more important to me not to be the last woman at the top of a company than to be the only one,” the trained doctor recently told the newspaper Frankfurter Allgemeine Zeitung.

Garijo previously served as the group’s deputy chief executive officer and head of its healthcare unit.

Her immediate focus will be on Merck’s frontline role in the fight against Covid-19, with Garijo announcing that the firm will scale up deliveries in the months ahead of the lipids used in vaccine production for clients such as Pfizer-BioNTech.

“We are turning the house upside down to do that,” Garijo told German news agency DPA.

She is replacing Stefan Oschmann, 63, whose term ended after five years at the helm of the Darmstadt-based, family-owned group, which had never had a female chief executive in its 350-year history.

Garijo, a mother of two and a passionate Real Madrid supporter, is making history as the first solo female leader of a firm listed on Frankfurt’s blue-chip DAX 30 index.

German software group SAP made the first cracks in the glass ceiling in 2019 when it appointed Jennifer Morgan as co-CEO alongside a male executive.

However she bowed out last year after just six months, as SAP decided to switch back to a sole chief executive – Christian Klein – to steer it through the pandemic upheaval.

‘Hard work’

Although Germany has been run by a woman chancellor for nearly 16 years and Christine Lagarde heads the Frankfurt-based European Central Bank, female top executives remain a rare sight in Europe’s leading economy.

Germany’s gender pay gap is also one of the largest in Europe, with women earning about 21 percent less than men on average. But things are changing.

The German government introduced legislation in 2015 requiring women to make up 30 percent of supervisory board seats in large companies, and Chancellor Angela Merkel’s cabinet approved plans in January to introduce similar rules for executive boards.

Garijo, who previously ran Sanofi’s European operations, joined Merck’s healthcare unit in 2011.

She has been credited with overhauling the department’s research and development and refocusing attention on fewer drugs with better prospects, boosting sales and profits, according to the Handelsblatt financial newspaper.

Garijo for her part puts her success down to “hard work” and to having seized her chances “when they arose”.

She is not, however, a fan of legal quotas to promote women, even in the face of middling results from voluntary measures by industry.

“I am against all forms of discrimination, including positive discrimination,” she said.

‘It’s time’

Under the draft law approved by Merkel’s government earlier this year, listed companies with four executives or more must appoint at least one woman to their executive boards.

Included in the new legislation, companies in which the government holds a majority stake – such as the rail group Deutsche Bahn – will have stricter rules, with at least one woman on management boards with more than two members, and a 30-percent quota to come in the future.

The legislation, the object of a political tug-of-war ahead of a general election to pick Merkel’s successor in September, must still pass parliament.

Seventy-three groups would be impacted by the new rules, among which 32 currently have no female representation in the executive suite, according to government data.

Merkel, in power since 2005, has spoken out at foot-dragging by business leaders, against the resistance of some in her own conservative bloc.

“It’s time, following action with the surveillance boards, for something to finally happen with executive boards – it’s in the interests of the companies too,” said Katharina Wrohlich, gender researcher at economic think tank DIW, which has since 2006 compiled a barometer of female representation at Germany’s top firms.

At the end of 2020, they counted just under 14 percent women on their executive teams, versus around 35 percent on supervisory boards, giving ammunition to those calling for legal remedies.

SEE ALSO: Why German stocks just hit a record high